Disabled Veteran Student Loan Debt Forgiveness
During this past year, the VA partnered with the Department of Education to identify total and permanently disabled veterans with outstanding federal student loans and notify them the debt could be forgiven. While the Total and Permanent Disability (TPD) discharge programs have been around for a while, changes to the tax code going into effect January 1, 2018 eliminated federal tax consequences of such forgiveness. For instance, in one situation the forgiveness of a student loan over $200,000 created an IRS tax debt of over $70,000, thereby making the benefit of the forgiveness program for veterans often illusory.
Nearly 42,000 veterans have been identified as qualifying for complete loan forgiveness under the TPD discharge program. Eligibility letters were mailed to these veterans explaining the application process. However, to date only 18% have had their loans forgiven. Reasons for such a low response have included the inability of some disabled veterans to complete the application process, income tax consequences imposed under certain state laws, and continued unawareness of the program and how to apply.
Before TPD discharge can be granted, the veteran must submit an application and provide information supporting the total and permanently disabled status. For veterans already designated by the VA as having service connected disabilities that are 100% disabling or totally disabled based on individual unemployability, supporting documentation has been or can be provided by the VA. For veterans still attempting to have their disabilities recognized by the VA, eligibility may still be established with a disability determination by Social Security or through the opinion of a doctor. And, its important to note, TPD discharges are also available for debts incurred by veterans on behalf of other family members.
For more information about the TPD discharge program or how to start an application, visit www.disabilitydischarge.com or call 888-303-7818.